With open market operations, the authority sells or purchases privately held
bonds. Open market operations do not involve foreign assets A contractionary
open market operation involves the selling of domestic bonds to private investors,
which reduces the monetary base. The authority purchases domestic bonds from private investors in an expansionary open market operation, thereby increasing the
monetary base. The open market operation is a swap of money for domestic
bonds, or a swap of domestic bonds for money. So the equality holds as follows